Go Big with Gib Podcast
Go Big with Gib is a podcast for professionals, business owners and entrepreneurs to talk about their big wins.
Go Big with Gib Podcast
Ep 56. Strategic Investing for Long-Term Success
Can passive real estate investing be your gateway to financial freedom? Explore this episode of Go Big With Gib, where I, Gib Irons, unravel the intricacies of passive real estate investing for beginners. If you're contemplating whether this investment strategy aligns with your financial goals, this discussion is a treasure trove of insights. Weigh the pros and cons of active versus passive investing, and discover why real estate could be a strategic addition to your portfolio. From understanding the concept of a 2x equity multiple over five years to analyzing your current investment performance across various assets, this episode offers a comprehensive guide to assessing the potential of real estate syndications.
Join me as we examine the stability real estate offers, particularly as a hedge against inflation. Even if your current investments like stocks, bonds, or Bitcoin outperform, real estate provides unique diversification benefits and a chance for wealth creation. The conversation goes beyond numbers, emphasizing the strategic partnership with experienced operators to maximize returns and secure your financial future. Whether you're at the start of your investment journey or seeking new avenues for long-term success, uncover the benefits passive investing can bring to your wealth-building strategy.
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Welcome to the Go Big With Gibb podcast, where we talk to professionals, business owners and entrepreneurs about their big wins. Hey guys, and welcome to this episode of Go Big With Gibb. I'm Gibb Irons, your host. Thank you for joining us today.
Speaker 1:I want to talk about passive investing. I talk to investors on the telephone every day, multiple times per week, and a lot of people are not sure if they want to be a passive investor. To make that determination, you really have to think about your goals and ask yourself a few questions. Is your goal to get a second job? Do you want to deal with tenants, toilets and termites? Do you want to be personally responsible for carrying out the business plan, monitoring the property, handling the CapEx, collecting the rents, doing all the things that are involved in being an active real estate investor? And what are your return expectations? Are you seeking cash flow or long-term appreciation? And thinking about my background, I've made money doing both active and passive real estate investing and I can tell you the pros and cons of each, which is what I want to talk about today. I understand that a lot of the audience that listens to this show may be very sophisticated investors, but this particular episode is actually for people that are at the very beginning of their passive investing journey or that are considering passive investing. With that in mind, I want to talk to you a little bit about the return metrics that you can expect with a real estate syndication.
Speaker 1:Most real estate syndications aim to achieve a 2x equity multiple in five years. Some real estate syndications these days like I'm recording here in January of 2025, know that a 2x equity multiple may be difficult to achieve and they may even project a 1.8 or 1.9x equity multiple, but during the time I've been doing this, the industry standard expectation is a 2x equity multiple over a period of five years. So let's talk about what does that mean? What that means is if you invested $100,000 in a real estate syndication from the day that you close on the property, you would then exit the investment in five years from the date of closing and at that time, the return for the limited partners would be $200,000 on a $100,000 investment. In other words, you get a 100% return of capital and you would double your money. So you need to look at how does doubling your money in a period of five years compare with your current investment portfolio, if your current investment portfolio whether that be real estate, stocks, bonds, mutual funds, bitcoin, whatever the case may be is achieving a higher return than a 2x equity multiple in five years, then maybe passive investing is not for you. Maybe you just need to continue doing what you're doing Now.
Speaker 1:Even for those people that fall into that camp, I would say we all want to have true diversification to the extent possible. Having some real estate in your portfolio still could be an advantageous move. Even if you are achieving higher returns with Bitcoin, let's say, or some other type of investment. Having real estate in your portfolio is a safe bet. It's a good hedge against inflation. The US dollar is constantly losing value and real estate isa great hedge against that potential loss. While a 2x equity multiple may be kind of the high level industry standard, the best performing deals might do 2.5 or even 3x, and I have seen that happen. You don't see, you're not seeing a lot of that right now, candidly, here, as we sit here in 2025. I'm not seeing a lot of that, but there is some of that out there, but those deals are the best performing deals.
Speaker 1:This episode of Go Big with Gibb is brought to you by Irons Equity. At Irons Equity, we specialize in helping investors like you create long-term generational wealth and save money on taxes through recession-resistant real estate investments that create passive income for you and your family. If you want to secure your financial future, go to investwithgibcom to schedule a 30-minute introductory meeting with me Gib Irons Again, that's investwithgibcom. That's investwithgivecom. Okay, so let's talk a little bit about some benefits of passive investing. Number one is you get to partner with the best operators in the world.
Speaker 1:When my wife and I acquired 14 rental properties in a period of 14 months, we really didn't know what we were doing in managing those properties. In a period of 14 months, we really didn't know what we were doing in managing those properties and by sheer luck and market appreciation, those properties have increased in value significantly. As a matter of fact, I purchased a lot of properties for $75,000. We did about $25,000 of CapEx on the properties, bringing our call spaces to $100,000. But a lot of those almost all of those properties could be sold for $175,000. That was based on sheer luck and, candidly, those apartment buildings that we purchased had been stuck at about $75,000 for several years, like maybe even more than 10 years, before we purchased. So our timing just happened to be right. But you don't always get that lucky. If you don't want to just bet on luck, which is a lot like gambling, you can do passive investing, where you're partnering with the very best operators that are going to do the best job of carrying out the business plan.
Speaker 1:The second benefit of passive investing is the minimum investment size. So the minimum investment for most real estate syndications is 50 or 100K. For that small price, you can get in on a big deal that has tremendous upside and you can participate in that deal. You can learn from the operator how they carried out the business plan, increase your knowledge base and education on how to run a deal like that without having too much skin in the game to where, if something goes sideways, it's going to ruin you. With a smaller investment size like that, you can really test the waters and enjoy the potential for a really big upside with a very small investment.
Speaker 1:Let's talk about cash flow. So real estate syndications produce cash flow and right now I'm seeing generally 5% to 7% cash flow. We currently have a deal right now that's a medical real estate opportunity that is projecting an 8% cash on cash return, which is higher than most opportunities and, quite frankly, one of the main reasons why I decided to raise for it In terms of the equity multiple. As we discussed, 2x equity multiple in five years is the standard. Another benefit of passive investing is depreciation Anytime you're investing in real estate. Real estate is a depreciable asset and we use bonus depreciation to go ahead and capture a very large K-1 loss in year one. For example, my medical real estate fund that I've talked about in other podcast episodes is offering 50% depreciation, so on a $100,000 investment, the investor is going to receive a $50,000 K-1 loss. What that means is that all of the returns the cash on cash returns during the holding period and the profit that we make upon disposition are going to be tax advantaged returns, and so you don't get that with stocks. That's another huge benefit of real estate investing. So those are the five benefits of passive investing.
Speaker 1:If you're a high income earner and you earn over $250,000 a year, then passive investing could be a great fit for you, and I'd encourage you to book a call with me. You can go to my website at investwithgibbcom. Thanks again for joining us today. I hope this episode presented you with some helpful information and look forward to seeing you next time. Thank you for listening to this episode of Go Big with Gibb. If you haven't already go, follow us on social media at GibbIrons. We'll see you next time.